CEO’s review
• Q2 2011 financial and operational highlights• Segment review• Execution of the strategy• Progress of new services and smartphone market development• Outlook for 2011
3
Q2 2011 highlights
• Strong revenue growth continued• Profitability was at a good level• Mobile subscription base and usage continued to grow• Smartphone market and 3G data services continued strong
growth trend• New data roaming service – predictable cost and excellent
coverage across Europe• New video conferencing service for corporate customers
4
Q2 2011 financial highlights
New services and smartphones boosted revenue
• Revenue € 378m (364)– Growth in equipment sales, mobile,
online and ICT services– Decrease in fixed telephony business
and MTR• EBITDA € 121m (119)• CAPEX € 54m (47), 14% of revenue
– Excluding IFRS booking of the new lease agreement € 47m, 12% of revenue
• Net debt € 845m (752)– Cash flow € 59m– Net debt / EBITDA 1.7 (1.5)
5
355 360 365353
364 363
383374 378
33 %
36 %
33 % 33 % 33 %35 %
32 %31 %
32 %
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Revenue, EURm EBITDA-%
Q2 2011 operative highlights
Strong growth in mobile subscriptions continued
• Mobile net adds 92,500 in Q2/11– Growth in both customer segments– Strongest growth in mobile broadband– Estonia +14,600 subscriptions
• Slight decrease in fixed broadband– Decrease 3,000 subscriptions in Q2/11– Seasonality
6
3 153 3 2183 329
3 4323 550
3 6523 797
3 898 3 991
482 476 467 462 462 464 467 478 475
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Mobile subs ('000) Fixed broadband subs ('000)
Q2 2011 operative highlights
Mobile churn decrease continued
• Growth in mobile services– Outgoing minutes growth +3% YoY– SMS growth +9% YoY
• Mobile churn 11.9% (15.9)– Both voice and mobile broadband
churns decreased– Competition has remained keen
7
1 589 1 586
1 645 1 652
1 719 1 707
1 749 1 739
1 76814,7 % 14,5 % 14,7 %
15,4 % 15,9 %
18,1 %
15,0 %14,3 %
11,9 %
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Usage (outgoing minutes, million) Churn*
* Annualised
Q2 2011 Consumer Customers
Growth in online services and equipment sales
• Revenue € 227m (217)– Growth in mobile usage, smartphone
sales and online services– Decrease in fixed telephony business
and mobile interconnection revenue• EBITDA € 72m (68), 32% of revenue
– Revenue growth– Cost efficiency
• CAPEX € 32m (27)
9
209220 217 214 217
225 229224 227
33 %
37 %
33 %34 %
31 %
34 %
31 %30 %
32 %
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Revenue, EURm EBITDA-%
Q2 2011 Corporate Customers
Growth in corporate customers’ ICT services
• Revenue € 150m (147)– Growth in ICT services and equipment
sales– Decrease in fixed network business
and mobile interconnection revenue• EBITDA € 49m (51), 32% of revenue
– Investments in ICT and video conferencing services
• CAPEX € 22m (20)
10
146
139
148
139
147
139
154150 150
33 %
36 %34 %
31 %
34 %36 %
34 % 34 %32 %
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Revenue, EURm EBITDA-%
11
Integration of One Elisa
New services and new markets
Strengthening marketposition in core markets
Strategy execution
Mobile broadband and smartphones growth continues
• Broad assortment of smartphones
• Smartphones top the list of most sold phones in June 2011
1. iPhone 4 2. Nokia C2-01 (feature phone)3. Samsung Galaxy Gio4. Nokia C6-015. ZTE Blade6. Samsung Galaxy S II
• 64% of all models sold were smartphones in Q2/2011
– In Q1/2011 50%, year ago 3%
12
11,5 %
17,0 %
19,5 %
22,0 %23,5 %
26,0 %
0,4 % 0,5 %1,5 %
3,5 %
6,5 %8,0 %
Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Mobile broadband penetration 1) Smartphone penetration 2)
1) Dongles and mobile BB add-on services of the total subscription base2) iOS (iPhone), Android ,Symbian 3^ and Windows phones
of the total phone base
Penetrations in Elisa’s network in Finland
1) Mobile BB penetration restated based on Ficora’sdefinition. Includes also multi-SIM BB subscriptions
Best 3G coverage in Finland
• Elisa’s investments in 3G network guarantee high quality user experience
• Research of European Communications Engineering, spring 2011
– Best 3G coverage– Most 3G base stations– Lowest interference levels
Bringio – new video conferencing service for corporate
• World’s first multiparty and multideviceHD video conferencing
• Video conferencing between– mobile phones– tablets– laptops– video conference rooms
€1/MB up to 5 MB
€4/MBup to 5 MB
€15/50 MB €50/50 MB
In the EU area Globally
Transparency for data roaming: Elisa Daily Traveller
• Predictable pricing for data usage abroad– mobile devices– laptops
• Excellent coverage through cooperation with Vodafone and Telenor
Outlook for 2011
• Positive trends of the Finnish economy have continued
• Competition remains challenging
• Slight increase in revenue
• EBITDA excluding one-offs to improve slightly
• CAPEX maximum 12 per cent of revenue
16
Revenue and earnings continued to grow
18
1) 1H/11 EBITDA excluding one off items EUR 240m2) CDO guarantee expense in H1/10 EUR 45m, and in 2010 EUR 40m
EUR million Q2/11 Q2/10 Δ 1H/11 1H/110 Δ 2010Revenue 378 364 13 752 717 35 1463Other operating income 2 1 3 2 5Operating expenses -259 -247 -12 -516 -485 -31 -984EBITDA 1) 121 119 2 239 234 5 485EBITDA-% 32 % 33 % 32 % 33 % 33 %Depreciation and amortisation -53 -54 2 -105 -108 3 -217EBIT 69 65 4 134 126 8 268EBIT-% 18 % 18 % 18 % 18 % 18 %Profit before tax 61 53 8 119 63 56 197Profit before taxes w/o one-off 2) 61 53 8 119 107 12 237Income taxes -16 -13 -3 -31 -15 -16 -47Profit for the period 45 40 5 88 48 40 151Profit for the period w/o one-off 2) 45 40 5 88 81 7 180EPS, EUR/share 0.29 0.26 0.03 0.56 0.31 0.25 0.96 EPS w/o one-off 1) 0.29 0.26 0.03 0.56 0.52 0.04 1.15
Revenue change YoY
19
22
13
Q2 2011
378
Corporatecustomers
Consumer customers
Equipment salesInterconnection and roaming
-4
Q2 2010
364+ Mobile+ Online Services+ Estonia- Fixed broadband- Cable TV- PSTN
+ ICT services+ M&A +/- Estonia- Mobile- PSTN
- MTR reduction+ Smartphones
Equipment sales and acquisitions increased OPEX
• OPEX decreases– Interconnections and roaming– Productivity improvements
– Network operating expenses– e.g. marketing and administration
• OPEX increases– Cost of equipment sales– Acquisitions in 2010
– Videra (June 2010) and Appelsiini(December 2010)
– Personnel expenses– Acquired companies in 2010– Salary increases based on collective
labor agreements 1 October 2010
20
EURmQ2 10
Q3 10
Q4 10
Q1 11
Q2 11
Materials and services 148 148 163 158 159
Employee benefit expenses
52 46 55 58 57
Other operating expenses 46 42 44 41 43
Total expenses 247 237 262 257 259
Depreciation 54 54 55 52 53
CAPEX/Sales in line with guidance
• Total CAPEX in Q2 EUR 54m (47), excl. new long term lease EUR 47m
– CAPEX/Sales 12% (13%) 1)
– Long-term data center infrastructure lease agreement classified as CAPEX in IFRS
• Q2/11 by segments 1)
– Consumer EUR 28m (27)– Corporate EUR 19m (20)
• Major CAPEX areas– Fixed access and backbone networks– 3G network– Customer equipment– IT systems
21
19 22
33
24 27 2631
2328
1719
28
15
2016
25
18
191
11
4
2010 %
11 %
17 %
11 %13 %
11 %
15 %
11 %12 %
-20 %
-15 %
-10 %
-5 %
0 %
5 %
10 %
15 %
20 %
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 1)
Consumer Corporate Shares 2) Capex/Sales
1) Excluding EUR 7m data center infrastructure lease Q2/112) Including acquisitions of business assets
Cash flow
22
EUR million Q2/11 Q2/10 Δ H1/11 H1/10 Δ 2010EBITDA 121 119 2 239 234 5 485Change in receivables 9 16 -7 12 21 -9 2Change in inventories 1 -2 3 -4 1 -5 -6Change in payables -21 6 -27 -33 -6 -27 11
Change in NWC -11 20 -31 -25 16 -41 7Finance income and expenses -1 0 -1 -18 -15 -3 -28CDO Guarantee settlement 0 0 0 0 0 0 -40
Financials (net) -1 0 -1 -18 -15 -3 -68Taxes for the year -11 -13 2 -26 -25 0 -47Taxes for the previous year 0 -6 6 0 -6 6 -6
Taxes -11 -19 8 -26 -31 6 -53CAPEX -45 -46 1 -86 -85 -1 -182Investments in shares 0 -5 5 -5 -5 0 -19Sale of assets and adjustments 5 1 4 6 2 4 2Cash flow after investments 59 70 -11 86 115 -29 172
Cash Flow after investments excl. one-off items 59 70 -11 86 115 -29 212
Subscription growth continued in Estonia
• Revenue EUR 26m (23), growth 11%– Growth in subscriptions
– + 84,900 YoY– + 14,600 QoQ– Equipment sales
– Improved economical situation in Estonia• EBITDA EUR 7m (6), growth 5% • CAPEX EUR 3m (3)
– 3G coverage
23
21 21 21 2123 23 23
21
26
36 %35 %
32 %30 %
28 %
32 %
23 %
30 %
26 %
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Revenue * EBITDA-% w/o one-offs
EUR million Q2/11 Q2/10 2010
Revenue 26 23 90EBITDA 7 6 25
EBITDA-% 26 28 28EBIT 4 4 14
EBIT-% 15 16 16CAPEX 3 3 12
*2009 excluding internal group items, restated 2010 onwards: subsidiary Elisa Eesti AS including group items
Liquidity position is good, RCF EUR 170m extended
• Cash and undrawn committed facilities EUR 302m (300)
• Revolving Credit Facilities– EUR 130m maturing Nov 2014– EUR 170m maturing Jun 2016, re-
arranged in June 2011• Commercial Paper Program
– EUR 160m in use• Credit ratings constant since 2003
– S&P BBB/Stable outlook– Moody’s Baa2/Stable outlook
24
Bond and Bank loan maturities
226
75
300
10
10 10 10 10
2011 2012 2013 2014 2015 2016 2017 2018
Bonds Loans
Capital structure in line with targets
• Capital structure – Net debt / EBITDA 1.7– Gearing 108%, Equity ratio 40%
• Target setting– Net debt / EBITDA 1.5 – 2x– Equity ratio >35%
25
773 729 719817 752 725 776 752
845
1,61,5 1,5
1,7
1,5 1,51,6
1,5
1,7
45 % 48 % 46 % 40 % 42 % 45 % 43 % 38 % 40 %
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
Net Debt, EURm Net Debt/EBITDAEquity ratio %
New MTRs agreed until November 2014
26
• Decreases mobile revenue and costs• Neutral for EBITDA• No direct impact on end user prices
Mobile Termination Price per minute, euro cents
Operator 1 Dec 2010 1 Dec 2011 1 Dec 2012-30 Nov 2014
Elisa 4.4 3.82 2.8
TeliaSonera 4.4 3.82 2.8
DNA 4.4 3.82 2.8
Competitive profit distribution
• Distribution capabilities maintained• Capital structure targets unchanged• Cash Flow generation in focus
– Net debt/EBITDA and gearing expected to decrease
• Authorisation max EUR 70m dividend or max 5 million shares buy back
– Board of Directors plans to pay EUR 0.40 per share
– If paid pro forma dividend yield 8% *
* Total profit distribution / share price as 30 December 2010 (€ 16.27)
27
123 116
402
285
156221
140
79
86
43
77 %
110 %
302 %
149 %
88 %
126 %
94 %
2005 2006 2007 2008 2009 2010 2011e
Dividend / capital repayment Buy-back
EUR 0.40 add. dividend* Pay-out ratio %
136%
* if decided by BoD
APPENDIX SLIDE
Consolidated Cash flow statement
29
EUR million Q2 2011 Q1 2011 Q4 2010 Q3 2010 Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009Cash flow from operating activitiesProfit before tax 61 58 66 68 53 10 56 70 56Adjustments to profit before tax 61 59 56 60 67 106 64 60 60Change in working capital -11 -13 18 -27 20 -4 26 -23 30Cash flow from operating activities 111 103 140 101 140 112 146 107 146
Received dividends and interests and interest paid 1) -1 -17 -41 -11 0 -15 -1 -12 -2Taxes paid -11 -15 -6 -16 -19 -13 -11 -11 -18Net cash flow from operating activities 99 71 92 74 121 84 134 84 127
Cash flow in investmentsCapital expenditure -45 -41 -55 -42 -46 -38 -61 -40 -36Investments in shares and other investments 0 -5 -10 -4 -5 -1 0 -2Proceeds from asset disposal 5 2 1 0 1 0 0 1Net cash used in investment -40 -44 -64 -45 -51 -39 -61 -41 -37
Cash flow after investments 59 27 28 29 70 45 74 43 89
Cash flow in financingShare Buy Backs and sales (net)Change in interest-bearing receivablesChange in long-term debt 0 0 0 -30 25 -36Change in short-term debt 80 -14 65 -42 -33 69 13 -62 -47Repayment of financing leases -2 -1 -1 -1 -1 -1 -1 -1 -1Dividends paid -140 0 -78 -1 -143 -63 0 -8Cash flow in financing -62 -15 -13 -43 -65 -50 -51 -64 -92
Change in cash and cash equivalents -2 12 15 -15 5 -5 22 -20 -2
1) Includes non recurring item: CDO guarantee settlement Q4/10
APPENDIX SLIDE
Financial situation
30
EUR Million 30 Jun 11 31 Mar 11 31 Dec 210 30 Sep 10 30 Jun 10 31 Mar 10 31 Dec 09 30 Sep 09 30 Jun 09
Interest-bearing debt Bonds and notes 600 600 599 598 598 597 572 572 570 Commercial Papers 160 120 102 68 110 118 74 62 119 Loans from financial institutions 51 52 52 52 52 80 80 80 80 Financial leases 35 24 23 23 24 23 23 24 27 Committed credit lines 1) 40 0 32 0 0 25 0 0 5 Others 2) 0 0 0 0 0 0 0 0 1Interest-bearing debt, total 887 795 808 742 784 843 750 738 802
Security depositsSecuritiesCash and cash equivalents 42 44 32 17 32 26 31 9 29Interest-bearing receivables 42 44 32 17 32 26 31 9 29
Net debt 3) 845 752 776 725 752 817 719 729 773
1) The committed credit lines are EUR 130 million and EUR 170 million revolving credit facilities with five banks, which Elisa Corporation may use flexibly on agreed pricing. The loan arrangements are valid until 23 November 2014 and 3 June 2016.2) Redemption liability for minorities3) Net debt is interest-bearing debt less cash and interest-bearing receivables.
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